Market Talk

Kathleen Madigan, Donna Kardos Yesalavich and I discuss the final 3Q GDP revision as well as how surging commodity prices look good but may hurt company balance sheets come 2011. Check it all and more on today’s markets hub:

Just another data point.

If you’ve been a faithful reader of our little blog, you know we’ve been preoccupied with, and fearful of, and warning about the economy doing exactly what it is now doing. That once the various stimuli wore off, the economy’s problems would still be there.

But even given that we’ve been expecting exactly what’s happening to happen, the economic reports these days are surprising even us (well, me, at least, really, but it sounds so much better when you put it in the editorial “we.”)

These things are turning into “tape bombs,” as in reports that hit “the Tape” like a bomb. (“The Tape” is a nickname for the Broadtape, which is what the Dow Jones news service used to be called back in the days when it literally was delivered as a long piece of tape (and thus, “ticker-tape” parades” down the Canyon of Heros in lower Manhattan.))

This morning’s stunner was the durable goods report. After two straight monthly declines, this one was expected to show a fairly solid rise of 3%, mainly on the back of strong orders that Boeing had already announced. Well, those orders were in there. But, still, orders overall rose just 0.3%. That means that excluding those plane orders, which always have an outsized effect on this report, everything else, well, everything else stunk.

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Kathlen Madigan, who writes The Big Picture column for Dow Jones Newswires, is the one who unearthed this tidbit in the summary of the FOMC minutes: that the Fed thinks it’ll be five or six years before the economy is back to “normal.” That’s five or six years of low (practically non-existent) interest rates, five or six years of slack labor markets (and likely wages as well, supply and demand don’tcha know,) five or six years of lumpy, uneven economic growth, some quarters good, some quarters bad.

Think anybody’s really factored that into their models? Maybe David Rosenberg and John Hussman, but not too many others. Whether or not the economy is technically in a recession — and remember, its end has not been officially declared, won’t matter if the economy is so weak people can’t find good jobs that pay livable wages, unless we are prepared to accept a pretty massive downgrade in our living standards.

From Madigan’s column:

Five or six years. That’s how long Federal Reserve officials expect it will take to get the economy back to where it was before subprime mortgages, Bernie Madoff and TARP entered into our daily conversations.

What’s worse is that five or six years might be optimistic, with unsettling implications for the medium-run outlook.

According to the minutes of the June 22-23 Federal Open Market Committee meeting, officials thought it would take “some time” for the economy to return to the rates of output growth, unemployment, and inflation consistent with the Fed’s policy goal. “Most expected the convergence process to take no more than five to six years,” the minutes said.

Whoa. With the recovery probably one year old, the implication is the economy won’t return to “normal” until 2014 or 2015. It’s an indication of how deep a hole we dug ourselves into: the Congressional Budget Office estimates the economy was functioning 5.8% below its potential in the first quarter.

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Madeleine Lim and Paul Vigna discuss Greece’s formal request for aid, the huge jump in new home sales and the durable goods report. It’s Tomorrow’s News Today.

Newswires’ Madeleine Lim and Kathleen Madigan discuss the upswing in global manufacturing and stronger US car sales. It’s Tomorrow’s News Today:

Newswires’ Kathleen Madigan and Madeleine Lim examine the ADP jobs report, Greece’s latest plan to tap global investment markets and the end of the Fed’s mortgage-backed securities purchase program. It’s Tomorrow’s News Today:

Newswires’ Eduardo Kaplan and Kathleen Madigan discuss consumer confidence, flat housing prices and Chrysler’s vow to break even. It’s Tomorrow’s News Today:

Newswires’ Madeleine Lim and Kathleen Madigan discuss the conflicting details in US GDP and existing home sales data as well as the latest on Greece. Check it out – it’s Tomorrow’s News Today.

Newswires’ Madeleine Lim and Kathleen Madigan discuss disappointing durable goods and jobless claims data as well as the latest on health-care overhaul plans, all on Tomorrow’s News Today.

A most curious jobs report, to be sure. Job losses fell 20,000 in January, but the unemployment rate also fell, to 9.7% from 10%. Neither occurrence was expected, and now the markets are being thrown into another tizzy over it. Is it good? Is it bad? Is it noise?

Market’s don’t seem particularly pleased: DJIA was down as much as 76, although it’s coming back, down only 28 currently. S&P 500 slipped as low as 1055.55, and you wonder if there’s some minor support there.

Here’s some observations from Newswires’ long-time economics reporter Kathleen Madigan that should help you suss it all out.

- January jobs report — down 20,000, unemployment rate at 9.7% — was influenced by several special factors that may not be consistent with the underlying jobs trend. Temporary hiring for the US 2010 census collection helped (added 9,000 jobs), while the unusually cold weather probably hurt it. Even so, the number is a big disappointment for those hoping the US began 2010 with jobs finally growing again.

- The employment report is confusing: jobs lost but unemployment down. But each measure of labor markets comes from two different surveys. Companies and governments surveyed for Labor’s establishment survey said they cut 20,000 jobs, on net. But households surveyed by the Labor Dept. said that 541,000 more jobs were created last month, helping to bring down the jobless rate. Gaps between both surveys are not unusual, but it suggests more people have struck out on their own or are working for companies too small to be captured by Labor’s survey.

- The number of discouraged workers rose to 1.06 million in January. The number is not adjusted, so monthly comparison are iffy. But compared to last January, the number of people who have given up looking for work is up 331,000.

- Amid the weaker-than-expected jobs report, at least November hiring was better than expected. The Labor Dept.’s revisions show jobs grew 64,000 that month, up from 4,000 reported earlier. Even so, the new data show payrolls ended 2009 1.3 million less than thought previously.

- Businesses continue to focus on using temp workers to increase output. Temporary help slots rose another 52,000 in January. While any job is usually better than no job, the short-term nature of temp help won’t make US workers feel more secure about the labor situation.

- Private payrolls fell 12,000 in January as hiring at service providers and manufacturers offset some of the losses in construction. The federal government added only 9,000 census workers last month, a bit less than many economists expected. The big layoffs occurred in state and local governments where losses were 18,000 and 23,000, respectively.